momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.It brings together, managers from the agricultural world and important people from external perspectives, such as health, development, strategy and defense. Its objective is to promote regulationof agricultural markets by creating new evaluation tools, such as economic models and indicators,and by drawing up proposals for an agricultural and international food policy.

Uncertain prospects for the future of European
agriculture

December 15, 2014

Brainstorming at the European Commission. On December 5, 2014, the DG AGRI held a conference to outline the prospects for European agriculture between now and 2024.

One of the crucial issues addressed at the conference was the future of the drivers of the European agricultural economy––milk, grain and meat––in a particularly uncertain and instable context. What are and will be the fundamental trends in the next decade according to the European Commission?

- Grain prices should stay above past EU averages, but below the 2010 and 2012 highs. Total meat consumption is falling, with poultry meat as the only sector where production and consumption should rise. Lastly, the EU dairy prospects should remain promising over the long term, due to growing global demand, and in spite of an expected short-term deterioration.

- For the next decade, real agricultural revenues should increase by six percent. Yet, there is a genuine disparity between member states. While new members should see revenues rise, it will not be the case for the Europe-Fifteen.

- More specifically, the Commission’s prospects for milk are optimistic. European milk prices should thus remain firm around €350/ton. In addition, the GIRA consulting firm, which was attending the Conference, estimates that the European Union will be the world’s key dairy region by 2018, provided that dairy farmers take advantage of markets outside the Union.

Undoubtedly, the severe price volatility represented one of the consensuses of the conference, but the statistics presented were far from meeting unanimous approval. Based on the reactions from the concerned professionals, they seem to be clearly disconnected from agricultural realities.

These estimates were based on limited exogenous risks and a seamless economic context. Yet, agricultural markets are subjected to multiple risks whose harmful consequences on price stability are intensified by the uncontrolled liberalization of agricultural markets. As a result, demand is inelastic, even with a low variation in agricultural supply since a one or two percent fluctuation in global output can lead to price variations of 50 to 100 percent. Just as it has been the case for fluctuations since 2007, agricultural prices will therefore experience both upward and downward strong instability in the coming years. In these complex anticipation markets, what could ultimately prevent a brutal and fatal price reversal?

Ironically, the crisis currently gripping the European Union might generate a new CAP at its next revision in 2017, a policy capable of effectively fighting the bane of volatility, and foster the quantitative and qualitative production by maximizing agricultural price levels.